Idaho Bars a Real Estate Transfer Tax

DRIGGS — Teton County's housing authority broke ground last week on 175 Front Street, a 26-home workforce project. Executive Director Jerod Pfeffer floated a real estate transfer tax to fund the next one, telling county commissioners on July 13 that a voter-approved levy could give workforce housing the recurring local funding source the valley lacks. Pfeffer had raised the idea with state Senator Mark Harris, he told commissioners.

Teton County needs up to 1,580 additional homes by 2027, at least 60 percent below market, according to a 2022 regional housing needs assessment. The median home costs three times what a median family can afford. Federal programs serve the lowest incomes and the market the highest, leaving the households in between without a program: the teachers, deputies, nurses, and trades workers the valley runs on.

The projects in progress

175 Front Street sits on county land near the Driggs search and rescue building. The county transferred the parcel to the housing authority, which is developing it with Northwest Real Estate Capital Corp using $4 million from the Idaho Workforce Housing Fund plus federal low-income housing tax credits. Pfeffer told commissioners the project will produce 23 income-restricted units and three units set aside for county employees. The county is to finish the interiors of its three units and hold them under a long-term lease.

Sherman Park in Victor drew a separate $4 million award from the same state fund and is already under construction, with 55 income-restricted units for households between 80 and 120 percent of area median income expected to begin leasing in the spring of 2027.

Pfeffer asked the county for $35,000 in operating support for the coming fiscal year. Commissioners took no action on the request and said they wanted to see the authority's budget before committing money.

Why a county can't levy the tax

The transfer fee is a harder problem than the $35,000. Idaho counties have no home-rule authority. They can exercise only the powers the Legislature has expressly granted them, and Idaho courts have held that the general police power does not include the power to tax. A county that wants to impose a tax has to point to a statute that authorizes that specific tax.

No such statute exists for a real estate transfer tax. Idaho is a non-disclosure state and imposes no transfer tax at any level of government. The one local-option authority the state does grant applies only to resort cities under 10,000 people, and it reaches no county. Driggs and Victor already use it, with voter-approved taxes on lodging and local sales. The statute allows only those kinds of taxes, and none of them is a tax on real estate.

The Legislature has been asked twice to authorize such a tax and has declined both times. In 2006, House Bill 532 proposed a local-option residential real estate transfer tax, capped at 1 percent, requiring a two-thirds vote and expiring within ten years. It died in the House Revenue and Taxation Committee without a hearing. A year later, Senate Bill 1196 proposed the sales-price disclosure system such a tax would need to operate. It died in the Senate Local Government Committee.

"Idaho cities are the only cities in the United States without authority to use any of these common housing strategies," Pfeffer wrote in his presentation, which listed seven tools unauthorized in Idaho, such as inclusionary zoning, rent control, and a real estate transfer tax.

The disclosure problem

A tax on a percentage of a sale price cannot be collected without knowing the price. States that levy one capture it at the moment the deed is recorded. The buyer swears the sale price on the face of the deed, and the county collects a fixed percentage. Because the rate is public and the tax paid is recorded, anyone can work backward from the tax to the price.

In Idaho, sale prices are not reported to assessors and are not public, and the state levies no transfer tax that would expose them. Only a handful of states hold sale prices private while levying a transfer tax.

Tennessee withholds sale prices, yet its transfer tax, 37 cents per $100 of value sworn on the deed, lets anyone recover the price by dividing the tax by the rate. Collecting a county transfer fee would mean building a system Idaho lacks, one that captures the sale price the moment a deed is recorded. Idaho law supplies neither the tax Pfeffer floated nor the price disclosure that would make it collectible.

What to watch: The county adopts its fiscal 2027 budget at an August public hearing, where commissioners decide whether to fund the authority's $35,000 request. The transfer fee is further off. The Legislature would have to authorize the tax before it could go to county voters.

175 Front Street Breaks Ground; the Housing Authority's Next Funding Idea Runs Into Idaho Law

The projects in progress

Why a county can't levy the tax

The disclosure problem

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